Letter and reply on Michael Roberts’ review of Glyn's Capitalism unleashed - finance, globalization, and welfare

A reader has objected to some of Michael Roberts’ criticisms of Andrew Glyn’s latest book. Among others it deals with the question of whether profit rates in the post-war period were affected by wage increases. Roberts replies showing that the fundamental reason for the decline was the same as that stated by Marx.

A reader has objected to some of Michael Roberts' criticisms of Andrew Glyn's latest book. Among others it deals with the question of whether profit rates in the post-war period were affected by wage increases. Roberts replies showing that the fundamental reason for the decline was the same as that stated by Marx.

I will begin by focusing on the third and fourth paragraphs in Roberts' review, in which he dismisses Glyn's thesis offhandedly, in one stroke, saying that Glyn's explanation was "broadly wrong."

Roberts reaches this judgment primarily by rejecting Glyn and Sutcliffe's thesis on methodological grounds, dismissing their conclusion - no matter its veracity - because it cannot be termed to have come from a Marxist approach.

I will submit that Glyn and Sutcliffe arrived at a correct analysis of the economic climate of the late '60s, an analysis which happens to be fully compatible with a Marxist-derived one.

Relying solely on Roberts' review for source material, I would like to contend that Glyn and Sutcliffe's position is correct. Clarity can be realized by interpreting their empirical observations using the framework of the empirically valid class struggle, or war.

Given that workers enjoyed full employment in the late '60s means that they were on the offensive - albeit for a brief period - against the forces of the bosses. The capitalists' desperate need for the productive power of labor was the flipside of their upswing, their Golden Age of modern capitalism.

Profitability during this time was directly dependent on the labor factor, at a time when labor was enjoying the fruits of successful international organization, even rivalling that of the capitalists which was beset by international competition.

Without making an explicit judgment, Roberts seems to tacitly agree with Glyn in paragraphs 6-7 in that capitalism got out of its slump, going into the '80s and '90s, by weakening the labor movement, privatizing assets from the former Soviet Union, slashing social welfare programs, and by increasing privatization of the state sector.

Roberts takes Glyn to task for selecting weak evidence in an attempt to answer the question as to why capitalism failed to revisit its postwar Golden Age despite implementing such drastic measures in the '80s and '90s.

I agree that capital's shift to emerging markets is insufficient by itself to explain its lackluster contemporary performance. It is valid to note, however, that emerging markets like India and China are relative latecomers, thereby serving as both indicators and effects of a mode of production that has hit its downslope.

Roberts chides Glyn for concluding that capitalism has merely plateaued, while Roberts forecasts a renewed crisis of profitability in the next couple of decades, based on Marx's Declining Rate of Profit.

I would argue alongside Roberts on this point, noting the global economy's current overdependence on U.S. growth, which itself is overdependent on U.S. consumer spending.

But even an accurate extrapolation of capitalism's trajectory into the future is not enough for a comprehensive prediction of the next chapter in the global class war. The highly subjective factor of working-class solidarity and global organization is extremely volatile, always, and seems to be entirely independent of, and non-correlative to, the "objective", or mechanical, dynamic of capitalism.

Roberts alludes to Marx's Declining Rate of Profit towards the end of his article, but seems off in his estimation of timing. He posits the last 25 years -- which would have to be '81 - '06 -- as years of "capitalist success". In fact, excepting the late-'90s tech-fuelled, short-lived boom, the last 25 years have been a period of mixed results, and even stagnation, for major economies in the advanced countries, with Japan as a prime example.

Furthermore, this period of stagnation has occurred during an era of vicious attacks on the working class, as Roberts points to in Glyn's work. Doesn't this contemporary reality adequately serve as evidence of the correctness of Marxist theory?

Chris Kaihatsu

January 11, 2006

An interesting criticism - my reply is along these lines:

By Michael Roberts

In response to Chris Kaihatsu, let me first say that in a book review of relatively short length it was not possible to outline in detail my criticism of Glyn and Sutcliffe's explanation of the end of the Golden Age of capitalism from 1948-73. In their view, profits were squeezed by labour's share of value added growing and not by a rise in the organic composition of capital which would be Marx's main argument for the decline in the rate of profit and eventually the mass of profit, and thus crisis.

The empirical evidence compiled by several people (including myself, yet to be published) is that the rate of profit in the OECD economies started to decline after 1964 well before labour's share rose sharply. The rising organic composition of capital was the main cause.

However, it is true that in the latter part of the sixties, profits were also squeezed by a rising share going to labour - something Marx envisaged in the later stages of the capitalist economic cycle. Glyn and Sutcliffe at the time not only denied the role of a rising organic composition of capital empirically but also denied its role theoretically in explaining any decline in capitalist profitability. They fell back on a non-Marxist explanation based on Ricardo.

This was important, because if profits were only squeezed by labour power then capitalism could right itself by destroying wage gains. My argument is that even if wages are held down, capitalism cannot succeed indefinitely because of Marx's explanation of declining profitability. The evidence now confirms Marx's view not Glyn's.

The capitalist backlash against labour in the 1980s laid the basis for a renewed rise in profitability but it was not just the reduction in labour's share that did the trick. It was also two deep economic recessions 1974-5 and 1980-2 that cut back the cost of constant capital (plant, machinery etc) and thus reduced the organic composition of capital. That was the key factor in renewing the profit cycle for capitalism.

As for timing, capitalism entered an upswing in profitability from 1982 that culminated in a peak (in Marxian value terms) in 1997. This enabled economic growth to be faster than seen between 1964-82 but still not as fast as between 1948-64. It seems that capitalism (at least in OECD) is past it and cannot grow as fast as it did in previous upswings, as Chris correctly points out - again something that Glyn finds inexplicable.

I reckon that capitalism is again in a downswing similar to the period 1964-82. That heralds a period with more economic slumps than we saw between 1982-00 (just one in 1990-1), lasting up to 2014.

As Chris says, unless the working class seizes its opportunities over the next decade, then capitalism will find a way to revive itself at the expense of us all.

Michael Roberts